Report No. 69

III. Illustration (a)

56.9. Some of the illustrations require discussion in detail, while some of them raise no problems. Taking up illustration (a), the court may, under that illustration, presume-

"(a) That a man in possession of stolen goods soon after the theft is either the thief or has received the goods knowing them to be stolen, unless he can account for his possession."

56.10. In accordance, however, with the caveat that the court shall also have regard to such special facts in considering whether such maxims do or do not apply to the particular case before it, the counter-illustration requires the court to bear in mind-"As to illustration (a)-A shop-keeper has in his till a marked rupee soon after it was stolen, and cannot account for its possession specifically, but is continually receiving rupees in the course of his business."

The limits of illustration (a) are illustrated in a recent decision1 of the Supreme Court, in which it has been pointed out that the presumption is an optional one. In that case, the explanation which the accused gave was good enough to raise a serious doubt about the sustainability of the charge of his having stolen the property. For that reason, the Supreme Court, after referring to a decision of the Privy Council,2 acquitted the accused. The case before the Supreme Court related to a stolen truck found in the possession of the accused, whose defence was that he did not know that the truck was stolen. He had been told by the person from whom he obtained possession that the truck had met with an accident, and that the accused would have to invest some amount over the repair of the truck. The arrangement was that after the amount was recovered from the plying of the truck, the truck was to be returned to the person who gave it to the accused.

1. K. Singh v. State of Maharashtra, AIR 1976 SC 1097 (June Issue).

2. O. Gfeller v. King, AIR 1943 PC 214 (215).

56.11. On these facts, the Supreme Court held that the explanation which the accused gave was good enough to raise serious doubts about the sustainability of the charge. If the explanation given is one which the court might think reasonable to be true, then the accused is entitled to acquittal even though the court may not be convinced of its truth. This is for the reason that the prosecution would then have failed in its duty to bring home the guilt of the accused beyond reasonable doubt. No change is needed in this illustration

IV. Illustration (I)

56.12. The Court may, under illustration (b), presum.-

"(b) That an accomplice is unworthy of credit, unless he is corroborated in material particulars."

There are, however, two caveats, and the Court is directed to have regard to such facts as the following:

(i) A, a person of the highest character, is tried for causing a man's death by an act of negligence in arranging certain machinery. B, a person of equally good character, who also took part in the arrangement, describes precisely what was done, and admits and explains the common carelessness of A and himself.

(ii) A crime is committed by several persons. A, B, C, three of the criminals, are captured on the spot and kept apart from each other. Each gives an account of the crime implicating D, and the accounts corroborate each other in such a manner as to render previous concert highly improbable.

56.13. The principal question to be considered with reference to this illustration arises by virtue of section 133, which provides that a conviction is not illegal merely because it proceeds on the uncorroborated testimony of an accomplice. We shall deal with this point later.1

1. See discussion as to section 133, infra.

V. Illustration (c)

56.14. The Court, under illustration (c), may presume-

"that it a bill of exchange, accepted or endorsed, was accepted or endorsed for good consideration."

To this is attached a counter-illustration, in the following terms:

"As to illustration (c), A, the drawer of a bill of exchange, was a man of business. B, the acceptor, was a young and ignorant person, completely under A's influence.".

Under section 118, Negotiable Instruments Act. 1881, the court shall presume consideration for a negotiable instrument until the contrary is proved.

56.15. Obscurity of the position.-

There seems to be considerable obscurity as to the proper relationship between illustration (c) quoted above (on the one hand), and section 118 of the Negotiable Instruments Act (on the other hand). Both the provisions relate to the presumption of consideration in regard to negotiable instruments. Both create rebuttable presumptions. But the Evidence Act makes the presumption discretionary, while the Negotiable Instruments Act makes it mandatory. The provision in the Evidence Act is, chronologically speaking, earlier, while the provision in the Negotiable Instruments Act is later.

56.16. The principal question is of reconciliation of the two. In a Madras case1 it was noted that the effect of the illustration in the Evidence Act is to make the presumption regarding consideration in respect of a negotiable instrument discretionary, while, under the Negotiable Instruments Act, the Court is bound to start with the presumption. But it was stated that there was no difficulty by reason of this position, because the kind of evidence which rebutted a discretionary presumption would rebut a mandatory presumption also. This is one way of reconciliation. Din Muhammad J. observed, in a Lahore case2-"What was merely permissible under the enactment of 1872 was converted into a statutory obligation in 1881."

1. Narasamma v. Veeraraju, AIR 1935 Mad 769 (773, 774).

2. Bannu Mal v. Munshi Ram, AIR 1935 Lah 599 (601, 602).

56.17. Present position not satisfactory.-

While this exposition of the law is unexceptionable, the position is not very neat from the point of view of a proper legislative formulation. It is not easy to answer the question whether the provision in the Evidence Act prevails, or that in the Negotiable Instruments Act, 1881, prevails. Dealing with this point, Vardachariar J., held in the Madras case,1 as already stated, that the considerations that can justify the court in refusing to draw a presumption (under the Evidence Act) must equally operate to rebut the presumption drawn under the Negotiable Instruments Act. With great respect, however, this does not appear to be an entirely satisfactory method of reconciling the two. The co-existence of two provisions on the statute book-not easily reconcilable-is not very desirable.

1. Narasamma v. Veeraraju, AIR 1935 Mad 769.

56.18. Bombay case.-

A Bombay case1 is of importance in this context. The facts of the case were as follows:

Professional money-lenders sued a young man recently come of age, to recover certain loans of money alleged to have been advanced by them to him on promissory notes. The defendant, who, under the will of his father, was entitled to a large property, but had not yet come into possession of it, was of an extravagant and reckless character. The defendant pleaded, as to a part of the consideration for the notes, that he did not receive it, and as to a further part, that the consideration was immoral. In dealing with the first plea, the Court laid down the following propositions2 not as rules of law, but as guides in considering the evidence in such a case:

1. That upon the above facts the ordinary presumption that a negotiable instrument has been executed for value received was so much weakened that the defendant's allegation that he had not received full consideration was sufficient to shift the burden of proof and to throw upon the moneylenders (the plaintiffs), the obligation of satisfying the Court that they had paid the consideration in full. That is the practical effect of illustration (c) to section 114 of this Act.

2. Where the plaintiff, in an answer to such a defence, affirmed that he had paid the consideration in full, and was corroborated by his books and witnesses, the onus of proof again shifted over upon the defendant.

3. The burden of proof thus thrown upon the defendant could only be met by perfectly truthful and harmonious statement which the Court felt able to rely upon the confidence. In the absence of this, the ordinary presumption laid down in the Negotiable Instruments Act must prevail, viz., until the contrary is proved, the presumption should be made that every negotiable instrument was made for consideration.

1. Matt Gulab Chand v. Mohamed Medhi, 1895 ILR 20 Born 367.

2. Summary taken from Woodroffe.

56.19. A similar view has been taken in other cases.1

These cases seem to hold that the ordinary rule that a negotiable instrument has been executed for value, is so much weakened by the allegation of the defendant, a young man that he has not received the full consideration, and this is sufficient to shift the burden of proof, and to throw upon the moneylender the obligation of satisfying "the court that he has paid the consideration2 in full."

1. Bhashyam Negotiable Instruments Act, (1974), p. 642.

2. Miran Baksh v. Mohammed Hussain, 2 PR 1902; Ram Raghubir v. !afar Mirza, 5 OC 307; Barkat Ullah v. Muhammad, 84 IC 866: 1925 Lah 272; Narasamma v. Veeraraju, ILR 58 Mad 841: AIR 1935 Mad 769.

56.20. Thus, in a suit upon three promissory notes executed in quick succession of each other by a young man who died pending the suit leaving a young widow, it was found that he was a man of considerable property. However, he was, at the time, out of possession, the property being in the management of his elder brother. It was also found that he was a man of extravagant habits, it was held that the onus would be shifted on the plaintiff, to make out that full consideration was paid as alleged by him.1

1. (a) Sundarammal v. Subramania Chettiar, 29 MLJ 236;

(b) Sami Sah v. Parthasarathy, 31 IC 739;

(c) Cf. C.S.A. No. 59 of 1926 (Mad) (endorsement by a Hindu widow, onus not shifted).

(d) Khader Mal v. Shee Narain, AIR 1943 All 90.

56.21. Guideline regarded as a rule.-

Some of these cases show that while the Bombay High Court, in the case already referred to1 wished to indicate only a guideline, that guideline has been taken as a rule.2

Other circumstantial evidence may also be given to rebut the initial presumption.3

1. Moti Gulab Chand v. Mahomed Medhi, 1895 ILR 20 Boni 367.

2. (a) Barkat Ullah v. Muhammad, AIR 1925 Lah 272.

(b) Narasamma v. Veeraraju, ILR 58 Mad 841.

(c) Shyam Behari La! v. Babooji, 1961 All LJ 681.

3. (a) Singar Kanwar v. Basdeo Prasad, AIR 1930 All 568;

(b) Jawahir La! v. Manna La!, AIR 1930 Oudh 108;

(c) Indersain v. Md. Gowher, AIR 1962 Mad 258.

56.22. Aspect of undue influence.-

The cases discussed about show that the law is not very clear, and it is desirable to reconcile the two provisions. One plausible way of reconciling the two provisions-i.e., section 118 and section 114-would be to regard illustration (c) to section 114 as sounding a note of warning that the rule laid down in the illustration was not intended to override the general provision of law that a contract entered under undue influence is bad. This was the approach suggested by Din Mohammad j., in the Lahore case.1

1. Bannu Mal v. Munshi Ram, AIR 1935 Lah 599.

56.23. However, with respect, it may be pointed out that undue influence is a much narrower term than mere "influence"; and the distinction between influence and undue influence is well understood.1 Where undue influence is relied on, it must be established that the person in a position of domination has used that position to obtain unfair advantage for himself and so cause injury to the person relying upon his authority.

1. Poosathurai v. Kannappa, AIR 1920 PC 65 (66).

56.24. Requirements of undue influence and those of section 114, illustration (c).-

In this context, undue influence cannot be predicated unless there is prior indebtedness and the transaction is unconscionable. These, however, are not the requirements of section 114, illustration (c), which is wider than section 16, illustration (c) of the Contract Act and section 111, Evidence Act.1

1. See V. Sundara Vyas Consideration in Negotiable Instruments, AIR 1937 Journal 33, 34.

56.25. Position of youngmen of extravagant habits.-

The matter is not merely academic. Often in the past1-for example, in the case of youngmen of extravagant habits borrowing money on a pronote the controversy assumed practical importance. It has been pointed out2 in an article published sometime ago that because of the obscurity of the position, litigants and lawyers are often confused as to what evidence they should lead to rebut the presumption of consideration or to support it. The question of onus becomes important where the evidence on both sides is equally balanced or is non-existent, because, in such eases, the onus is the determining factor.

1. See discussion, supra.

2. V. Sundara Vyas Consideration in Negotiable Instruments Act, AIR 1937 Journal 33, 34.

56.26. Recommendation as to illustration (c).-

In the circumstances, we recommend that section 114, illustration (c) and the counter-illustration, should be repealed, so as to leave free scope to section 118 of the Negotiable Instruments Act. It is not desirable that on the same point, the statute book should contain two presumptions, of which one is discretionary while the other, though rebuttable, is mandatory.

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